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Financial service firms preparing for deluge of new cybersecurity regulations, say Duff & Phelps

Chris Hamblin, Editor, London, 5 April 2017

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86% of financial firms intend to increase the time and resources they spend on cybersecurity in the next year, according to new research from Duff & Phelps, the corporate advisory giant.

Duff & Phelps surveyed 183 senior financial service executives, compliance officers and investment managers operating in the USA, Europe and Asia earlier this year. Its survey shows that firms are preparing to take more stringent cybersecurity measures in response to mounting regulatory scrutiny and growing pressure to protect information that belongs to (or pertains to) investors.

Duff & Phelps found that two-thirds of financial firms expect cybersecurity to be a priority for regulators this year and 31% believe that it will be the most important priority for those regulators. 39% also believe that regulators intend to scrutinise firms' financial crime and know-your-customer (KYC) compliance departments, whose business is increasingly converging with cybersecurity because regulators expect firms to take a holistic view of cyber-threats.

In addition, 62% of people in financial services believe that the US Securities and Exchange Commission’s proposals to make investment advisors report more information will affect their firms. In response to high-profile cyberattacks in recent years, some firms are now required to adopt written policies to protect their clients’ private information and must evolve new processes to protect themselves against future cyberattacks.

With the British Government introducing a new cybersecurity strategy in November 2016 and the Trump White House reviewing US cybersecurity strategy, Duff & Phelps is expecting cybersecurity to be a top priority for regulators, governments and financial institutions alike in 2017. It believes that many firms are anticipating clearer and more punitive cyber-security regulation and are thinking of, or deciding to, or about to, or trying to, strengthen cyber defences as a result, presenting financial institutions with opportunities to collaborate with regulators on the formation of new rules. It also anticipates that commercial pressures from HNW investors who are concerned about the security of their sensitive data will accelerate firms' efforts to improve cyber-security. For all these reasons, it expects 2017 to be a 'watershed' year for cyber-security regulation. Commenting on the survey, Jake Summerfield of the Network Group added: "In our annual survey of chief information security officers (CISOs) and information security professionals from the industry, 53% said they would actively invest in data security and integrity measures to combat a potential data breach."

High-profile cyber-attacks at Tesco Bank, Lloyds and TalkTalk have rocked the UK's business sector recently and the European Union's next data protection directive, which the UK will have to obey even though it is quitting that political alliance, promises more punitive action against companies that suffer 'data breaches.' Nowhere, however, is the cyber-threat more ominous than in financial services. For more on the Duff & Phelps survey, click here.

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